Question 1

_____ When Dubke retired from the partnership of Dubke, Logan, and Flaherty, the final settlement of Dubke's partnership interest exceeded Dubke's capital account balance. Under the bonus method, the excess

Accepted Answer

Under the bonus method, when a partner's final settlement exceeds their capital account balance, the excess is treated as a bonus to the retiring partner. This bonus reduces the capital balances of the remaining partners, in this case, Logan and Flaherty.

Question 2

_____ Data for the partnership of A and B follow:
 Cook is to be admitted into the partnership and is to have a one-fifth interest in capital and profits with a cash contribution of $40,000. The balances in the capital accounts of A, B, and C under the bonus method are:

Accepted Answer

The answer of _____ Data for the partnership of A...

Question 3

_____ Data for the partnership of Able and Baker follow:
 Cook is to be admitted into the partnership and is to have a one-fifth interest in capital and profits with a cash contribution of $40,000. The balances in the capital accounts of Able, Baker, and Cook under the recording the goodwill method are:

Accepted Answer

The answer of _____ Data for the partnership of Able...

Question 4

_____ Data for the partnership of X and Y follow:
 Z is to be admitted into the partnership and is to have a one-third interest in capital and profits with a cash contribution of $30,000. What are the balances in the capital accounts of X, Y, and Z under the bonus method?

Accepted Answer

The answer of _____ Data for the partnership of X...

Question 5

_____ Data for the partnership of X and Y follow:
 Z is to be admitted into the partnership and is to have a one-third interest in capital and profits with a cash contribution of $30,000. The balances in the capital accounts of X, Y, and Z under the recording the goodwill method are:

Accepted Answer

The answer of _____ Data for the partnership of X...

Question 6

_____ Ames and Buell are partners who share profits and losses in the ratio of 3:2, respectively. On 8/31/06, their capital accounts were as follows:
  On that date, they agreed to admit Carter as a partner with a one-third interest in the capital and profits and losses, for an investment of $50,000. The new partnership will begin with a total capital of $180,000. The partners' capital balances immediately after Carter's admission are:

Accepted Answer

The answer of _____ Ames and Buell are partners who...

Question 7

_____ At 12/31/06, Reed and Quinn are partners with capital balances of $40,000 and $20,000, and they share profits and losses in the ratio of 2:1, respectively. On this date, Poe is admitted into the partnership. Poe invests $17,000 cash for a one-fifth interest in the capital and profit of the new partnership. Assume that goodwill is not to be recorded. The credit to be made to Poe's capital account at 12/31/06 is:

Accepted Answer

20% × $77,000 = $15,400

Question 8

_____ Diller decided to withdraw from the partnership. Diller's share of the partnership profits and losses was 25%. Upon withdrawing from the partnership, Diller was paid $91,000 in final settlement for his interest. The total of the partners' capital accounts before recognition of partnership goodwill prior to Diller's withdrawal was $370,000. After Diller's withdrawal, the remaining partners' capital accounts, excluding their share of goodwill, totaled $310,000. The total agreed-upon goodwill of the firm is:

Accepted Answer

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Question 9

_____ X and Y are partners and have capital balances of $70,000 and $30,000, respectively. X and Y share profits and losses in the ratio 6:4, respectively. Z is admitted into the partnership by purchasing one-fifth of the capital interests of X and Y for a total price of $25,000. The capital balances of X, Y, and Z will be:

Accepted Answer

X sells 1/5 of $70,000, which is $14,000, and Y sells 1/5 of $30,000, which is $6,000, to Z. Therefore, X's new balance is $70,000 - $14,000 = $56,000, Y's new balance is $30,000 - $6,000 = $24,000, and Z's balance is $14,000 + $6,000 = $20,000.

Question 10

When a partner is admitted into a partnership, the amount of existing partnership liabilities for which the new partner becomes responsible is treated for income tax-reporting purposes as ___________________________________.

Accepted Answer

The answer of When a partner is admitted into a...

Question 11

When a partner retires from a partnership, the balance in that partner's capital account that is distributed to that partner is treated as ________________________ for income tax-reporting purposes.

Accepted Answer

The answer of When a partner retires from a partnership,...

Question 12

When a partner retires from a partnership, the amount of existing partnership liabilities for which the retiring partner is no longer responsible is treated for income tax-reporting purposes as _______________________________________.

Accepted Answer

The answer of When a partner retires from a partnership,...

Question 13

A gain or loss for income tax-reporting purposes on a partner's disposal of a partnership interest is computed by comparing the partner's __________________ to his or her _________________________________.

Accepted Answer

The answer of A gain or loss for income tax-reporting...

Question 14

When a partner withdraws from a partnership, the partner's gain or loss for income tax-reporting purposes is not made by comparing his or her proceeds with the balance in his or her capital account.

Accepted Answer

The gain or loss is determined by comparing the proceeds received with the partner's outside basis in the partnership, not the capital account balance.

Question 15

_____ When a partner withdraws from a partnership, the determination of the withdrawing partner's gain or loss for income tax-reporting purposes is made by comparing:

Accepted Answer

The correct answer is D because for tax purposes, a partner's gain or loss upon withdrawal is determined by comparing the sum of any proceeds received plus the share of partnership liabilities from which the partner is relieved, against the partner's tax basis in the partnership.

Question 16

_____ A, B, and C are in partnership and share profits and losses equally. C is retiring. The balance in C's capital account is $60,000. C is to be given a cash bonus of $5,000 as a result of unrecorded goodwill. The partnership has liabilities of $18,000 at the time of C's withdrawal. C's tax basis is $55,000. C's taxable gain or loss is:

Accepted Answer

The answer of _____ A, B, and C are in...

Question 17

_____ Tax basis: Assume the following data for the partnership of A and B:
 A and B share profits and losses 75:25, respectively. C is admitted to a one-fifth interest in the capital and profits and losses of the partnership by contributing $40,000 (one-fifth of the net assets of the new firm) and assumes a one-fifth responsibility for present partnership obligations. The tax bases of A, B, and C after the admission of C are

Accepted Answer

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Quiz 21: Partnerships: Changes in Ownership

_____ When Dubke retired from the partnership of Dubke, Logan, and Flaherty, the final settlement of Dubke's partnership interest exceeded Dubke's capital account balance. Under the bonus method, the excess

_____ Data for the partnership of A and B follow: Cook is to be admitted into the partnership and is to have a one-fifth interest in capital and profits with a cash contribution of $40,000. The balances in the capital accounts of A, B, and C under the bonus method are:

_____ Data for the partnership of X and Y follow: Z is to be admitted into the partnership and is to have a one-third interest in capital and profits with a cash contribution of $30,000. What are the balances in the capital accounts of X, Y, and Z under the bonus method?

_____ Data for the partnership of X and Y follow: Z is to be admitted into the partnership and is to have a one-third interest in capital and profits with a cash contribution of $30,000. The balances in the capital accounts of X, Y, and Z under the recording the goodwill method are:

When a partner is admitted into a partnership, the amount of existing partnership liabilities for which the new partner becomes responsible is treated for income tax-reporting purposes as ___________________________________.

When a partner retires from a partnership, the balance in that partner's capital account that is distributed to that partner is treated as ________________________ for income tax-reporting purposes.

When a partner retires from a partnership, the amount of existing partnership liabilities for which the retiring partner is no longer responsible is treated for income tax-reporting purposes as _______________________________________.

A gain or loss for income tax-reporting purposes on a partner's disposal of a partnership interest is computed by comparing the partner's to his or her _______________.

When a partner withdraws from a partnership, the partner's gain or loss for income tax-reporting purposes is not made by comparing his or her proceeds with the balance in his or her capital account.

_____ When a partner withdraws from a partnership, the determination of the withdrawing partner's gain or loss for income tax-reporting purposes is made by comparing: